Information Law and Policy & Emerging Tech and National Security

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Over two weeks after the ban on Huawei was imposed by the United States on suspicions of facilitating espionage on behalf of China, the newly appointed Minister of Electronics and IT, Ravi Shankar Prasad acknowledged that there are ‘complex security concerns’ around the deployment of Huawei’s technology in India. His statement comes soon after the TRAI’s statement emphasizing the need to indigenize telecom infrastructure in the aftermath of the US ban on Huawei.

The Chinese tech giant has been at the centre of controversy even before May 16, when President Trump signed an Executive Order entitled ‘Securing the Information and Communications Technology and Services Supply Chain’, declaring a national cybersecurity emergency, placing Huawei on the ‘Entity List’ of the US Department of Commerce under Supplement 4 to Part 744 of its Export Administration Regulations. This implies that any US persons and corporate entities that continue to do business with Huawei would face heavy penalties that could potentially include criminal sanctions. Owing to the design of export control laws in the United States, the enforcement of the ban in the United States has extraterritorial effects. According to a Reuters report, US Secretary of State Mike Pompeo warned allies of potential difficulties in sustained cooperation and data sharing with the United States if they continued to use Huawei equipment despite the ban.

Huawei in the
United States

Criminal charges
pending against Huawei in US courts include serious
allegations of corporate espionage, bank fraud, theft of trade secrets and most
importantly, conspiracy to violate the International Emergency Economic Powers Act
(50 U.S.C. 1701 et seq) (IEEPA) by export of telecommunications
services provided by a US citizen to Iran without permission from the Office of
Foreign Assets Control (OFAC). It was on the grounds of violation of the IEEPA that
the US successfully urged Canada to detain Huawei’s CFO, Meng Wanzhou, who is
now awaiting potential
extradition to the United States for prosecution
for the crimes alleged against Huawei.

Some in the US
national security community have even argued that this could potentially be an abuse of the
President’s emergency powers under the
IEEPA, the legislation that enables the US to‘financially asphyxiate targeted
countries, entities or individuals’ that pose ‘any unusual and extraordinary
threat’ to US national security interests. Others, based on Trump’s
statement that saw Huawei being potentially included in a
future trade deal with China, take the view that the ban is no more than a
leveraging tool to get concessions from the Chinese Government. Yet more view
it as a measure designed purely to protect US
telecom industries from Chinese competition in the 5G race,
to prevent the US from losing its edge in communications technologies.

A major reason for the rapid rise of Huawei on the global tech scene has been its competitive prices and convenient payment plans. Thanks to the ban, rival companies like Cicso, Ericsson, Nokia and Samsung do indeed, stand to gain significant advantages and grab bigger market shares, but their prices so far have not been able to compete with those offered by their Chinese counterparts.

Despite this ‘emergency’, a week after President Trump signed an Executive Order, the restrictions were eased by the US Department of Commerce to give American companies a 90 days window to adapt to the new restrictions. In the time that has passed, several tech companies have severed business ties with Huawei. Google was the first to respond, cutting off Huawei’s access to its Android platform, restricting existing users’ access to future security patches and updates. Microsoft, Intel, Qualcomm, Xilinx, Broadcomm, Panasonic and British Chip manufacturer ARM soon followed suit, causing serious disruptions in the global ICT supply chain, especially in its smartphone manufacturing. However, the smart phone business is only a small part of Huawei’s overall products range. It is noteworthy that as on date, Huawei controls 28% of the global marketshare in telecom equipment. In the first quarter of 2019, Huawei surpassed Apple to become the world’s second largest manufacturer of smartphones. Much to the worry of American telcos, some forecasts indicate that China is expected to represent 40% of all global 5G connections by 2025.

Although
Huawei’s founder and CEO, Ren Zhengfei has opposed
retaliation by the Chinese Government against Apple or other American tech companies,
it remains to be seen how China will respond in the ongoing trade tensions with
the US. Some changes to
set up a mechanism that allows for higher degree of protection to its own
national security interests have already been introduced in Chinese cyber
security law in response. China has also threatened the creation of a ‘sweeping
blacklist of US firms’ in retaliation. Reports indicate that
the export of rare
earth minerals to China by the US could be the next
frontier in these ‘hostilities’.

In addition, the Chinese Defense Minister Wei Fenghe came out to explicitly state that Huawei was not part of its military, several Chinese officials have refuted US claims alleging that the decision to blacklist Huawei was unsupported by any evidence. Unsurprisingly though, Russia has rolled out the red carpet for Huawei, where it signed a deal to develop 5G infrastructure for Russian telecom provider MTS.

However, the
most important piece of Chinese legislation for India to consider is the
Chinese intelligence law
passed in 2017 that makes it obligatory upon Chinese
companies and other entities to share onshore and offshore data with the
Government as and when called upon in the interest of national security.

Huawei in India

Some have argued
that India would need
to conclusively prove allegations of assisting the
Chinese government in carrying out cyber espionage before taking any concrete steps
to ban Huawei, otherwise India risks undermining its strategic autonomy and
playing into the hands of the US. However, the argument seems focused
exclusively on the rapid introduction and operationalization of 5G in India and
ignores India’s previous run-ins with Huawei’s technology.

Telecom companies through the Cellular Operators Association of India have sought clarification from the Department of Telecommunications (DoT) on its stance qua usage of Huawei-manufactured equipment by telecom operators. Such a clarification is much needed, considering that Huawei has been kept on a see-saw since September 2018, when the US first started attempting to persuade allies to wall out Huawei in the 5G race. In India, Huawei was first excluded, then extended an invitation which was later rescinded. Huawei India’s CEO Jay Chen recently made a statement demanding a ‘level playing field’ for Huawei in the 5G trials, reiterating the request of the Chinese Government from December of last year.

Presently,
telecom operators including Airtel and Vodafone use
Huawei equipment in many of their circles in India. While the TRAI has
highlighted the need for indigenizing of telecom infrastructure, the truth of
the matter is that as on date, almost 60% of
the Government’s telecom equipment, including especially that of BSNL is
supplied by the Chinese companies ZTE and Huawei. This is despite the fact that
BSNL’s allegations
against Huawei of hacking into its networks were
investigated in 2014. This makes the argument that requires conclusive proof of
malicious activity difficult to sustain, if the security of the existing
infrastructure has already been compromised in the past.

Huawei itself has urged the DoT for an expedited decision on its inclusion in the 5G trials, reportedly after having answered all queries posed to it by the DoT. The DoT appears divided on the issue – with one section that views it as an issue of not just technology, but also one of security with geopoilitcal ramifications, and the other seemingly inclined towards Huawei’s inclusion to maintain the competition and mitigate risks of relying on supplies from European vendors alone.

The New Berlin
Wall and India’s Posturing

At the moment,
India seems to have been caught in the middle of what has been dubbed as the
New Cold War in tech–faced with
prohibitively high prices on the one side, and a risk of
Chinese cyber espionage on the other. On this point, some take the view that ‘what is cheap
now may not be good in the long run’. National
security choices require nations to make difficult trade-offs between economic
and strategic goals and considerations, and the contours of the new ‘Great
Powers’ relations are radically different to the one that ended with the fall
of the Berlin Wall. The New York Times
viewed the ban as one that is “about much more than crippling one Chinese tech
giant”, and is forcing “nations to make an agonizing choice: Which side of the
new Berlin Wall do they want to live on?”

In the collision of tech and trade, foreign policy choices of Governments are now closely intertwined with the commercial interests and health of the domestic telecom and tech industries. Although it is reassuring that India’s telecom minister seems intent on taking ‘a serious look’ at the technological advantage versus security concerns calculus before deciding on Huawei’s inclusion in the upcoming 5G trials, remedial and mitigation measures like reviving MTNL and BSNL services are measures for the long run. However, what makes India the desired location for ‘proxy wars’ in tech is the treasure trove of data that lies beneath the massive subscriber base of over 1.19 billion individuals to telecom services. As for the health of domestic markets, if anything, Indian telecom giants like Reliance Jio that uses 4G equipment manufactured by Samsung, could potentially stand to gain from the move, if Huawei were to be excluded from the Indian market and the 5G trials. It remains to be seen whether such a protectionist measure, following the footsteps of the US, would be introduced by the new Government that has re-risen to power on the promise of strengthening national security. A legitimate concern is the threat of retaliatory pressure tactics from the US if India does fail to do so.

It is notable that India has taken some measures to avoid offending the United States’ declared policies, while the decision on Huawei remains pending. A week after the ban, India stopped importing oil from Iran as well as Venezuela to comply with US sanctions after the US ended exemptions for eight countries including India. More recently, the US revoked India’s preferential trade status under the GSP (Generalised System of Preferences) trade program, alleging that India has not “assured the US that it will provide equitable and reasonable access to its markets”. The US-China trade war presents a similar spectrum of choices to India – while the Ministry of Commerce is mulling over the imposition of ‘retaliatory tariffs’, others take the position that India should cut interest rates to take advantage of the trade war to gain a stronger foothold in both markets.

Against the
backdrop of this new political economy of the cybersecurity industry, a new
kind of non-alignment seems to be emerging, creating an unmistakable split in
traditional alliances between NATO members. Only two of the ‘Five Eyes
Alliance’ of intelligence sharing other than the United States – Australia
and New
Zealand responded quickly by banning Huawei in their respective national
jurisdictions. Some European counties, specifically – the UK and Germany,
while also remaining mindful of the risks posed by Chinese covert activity
through its tech industry that has undeniably acquired a global influence, are seemingly
intent on not abandoning Huawei in the design of their 5G infrastructure. Canada
too, while juggling the pending
extradition of Huawei’s CFO to the US, appears determined to make an
independent decision on the 5G question. At the moment, India’s policies seem
to just as non-aligned as those of Germany or the United Kingdom – aimed at maintaining
the free flow of investments and information while steadily moving towards
indigenization of ICT and expansion of markets instead of encouraging
protectionism to curb competition.

Until such time that
India can completely indigenize the equipment, or alter its telecom equipment
procurement policies across the board to exclude obvious threats to
the integrity of our cybersecurity infrastructure, India’s choice seems to be a
limited to a cybersecurity policy along the lines of the Nehruvian-era doctrine
of non-alignment, perhaps with only slight tilt— this time, toward the United
States? It would appear that the time is ripe for NaMo 2.0 to revisit the
doctrine as NAM 2.0, in
a manner that allows India to preserve the security alliance with one side, and
an economic partnership to avoid disruptions and price escalations in our ICT
supply chain on the other. In other words, the need of the hour is ‘to
effectively manage our global opportunities to maximize our choices’ while
preserving strategic autonomy.